Lloyds Investors Take Compensation Fight to US
SEC and New York Attorney General to be asked to investigate HBOS merger
July 15, 2010, Press Dispensary. Lloyds TSB investors pursuing claims for compensation over the collapse of the bank's share price following its takeover of HBOS at the height of the financial crisis have taken their case to the United States.
The Lloyds Action Now (LAN) group has written to the powerful Securities Exchange Commission chair Mary Shapiro and New York Attorney General Andrew Cuomo asking for meetings at which it will submit evidence Lloyds directors contravened US Securities laws.
Often referred to as the "truth in securities" law, the US Securities Act of 1933 governing the way shares are traded has two basic objectives, to require that investors receive financial and other significant information concerning securities being offered for public sale and second to prohibit deceit, misrepresentations, and other fraud in the sale of securities.
The move raises the prospect that former chairman Sir Victor Blank may be extradited to the US under the controversial Extradition Act 2003 that gives unilateral powers to US authorities to extradite UK citizens accused of offenses committed in the States, as happened in the case of the NatWest Three. As a US citizen Lloyds CEO Eric Daniels would be covered by the reciprocal US-UK extradition treaty.
LAN has contacted the 1,400 US private shareholders on whose behalf Shapiro and Cuomo are being asked to act informing them that a Class Action civil law suit is also being filed in the US and inviting them to register with the association in order to benefit from any litigation undertaken on behalf of shareholders in the UK.
Jillian Timmis, acting chair of LAN, said; “Lawyers have advised us that there are very strong similarities between what happened with Lloyds and HBOS and the case currently being pursued by Mr Cuomo against the Bank of America over its takeover of Merrill Lynch.
“In both takeovers information about the true financial state of the acquisition company was known to the boards but not disclosed to shareholders as demanded by the US Securities Act and the UK Financial Services and Markets Act.
“We say the non-disclosure that HBOS was being secretly supported to the tune of £25.4 billion was a blatant breach of the law in both countries.”
As in the UK, the Lloyds HBOS takeover has devastated many ordinary men and women who invested in Lloyds for their retirement. Former sea captain Albert Ross, 78, of Christwood, Covington, Lousiana, and his wife Lillian faces eviction from his home after losing $342,000 from his retirement fund.
“My wife and I face losing everything we have worked for. It is not just our home but our dignity. We are proud people who have worked hard to maintain our independence only to see everything stripped away from us.”
Lawyers acting for LAN have spent a year investigating the background to the Lloyds/HBOS merger and have compiled evidence from a wide range of sources including Freedom of Information requests, evidence to the Treasury Select Committee and minutes of the Bank of England and the Financial Services Authority.
Jim Rai, head of litigation at London solicitors Winckworth Sherwood and acting for LAN said: “ An extremely strong case for compensation is building against HM Treasury which underwrote the circular on the merger and directors responsible for what it contained.”
Letters of claim on behalf of two test claimants from among LAN's 750 membership were sent to HM Treasury, Sir Victor and Mr Daniels last month in which they were given 90 days in which to formally respond.
LAN is holding the second of a series of regional meetings for shareholders at the Royal Albion Hotel, Old Steine, Brighton, on Friday, 16thJune at 6.30pm at which Britain's first Green Party MP, Caroline Lucas, the member for Brighton Pavilion, will be attending.
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Notes for editors
Extensive background information about Lloyds Action Now, its structure and the case against the Government and Lloyds directors can be found on the campaign’s website http://www.lloydsactionnow.
The association’s full letter of claim against on behalf of test claimants can be obtained by clicking on the links at the Lloyds Action Now online press office at www.pressdispensary.co.uk. The identities of the claimants have been redacted in this version of the document.
Lloyds Action Now is a not-for-profit organisation set up by shareholders for shareholders. It has instructed leading London law firm Winckworth Sherwood as solicitors and other professionals to assist with the case management and promotion of the case. Again, full details are on http://www.lloydsactionnow.com.
The association and its advisors have spent a year researching the economic, political and legal background to the Lloyds TSB/HBOS merger and the direct involvement of former Prime Minister Gordon Brown in one-on-one meetings with former Lloyds chairman Sir Victor Blank. Sir Victor resigned shortly after the AGM of the combined Lloyds Banking Group in June last year where he was subjected to extensive criticism over the merger that made his continued stewardship untenable.
LBG CEO Eric Daniels was similarly criticised for the way in which the merger was carried out by the Treasury Select Committee to whom he admitted that only a third of the due diligence that might normally expected on such a deal was actually carried out. In a second appearance he insisted a minor reference to support given to HBOS in the merger prospectus, instead of stating the exact amount of £25.4 billion, was ‘thorough disclosure.’
When he was Liberal Democrat economics spokesman, Business Secretary Vince Cable said in Questions to the then Chancellor Alistair Darling that the Government and Lloyds TSB were entirely wrong to insist on the secrecy of the Bank of England loan to HBOS while shareholders were considering the merger and that they should have nationalised the bank and thereafter taken the bank back into private ownership before going ahead with merger if it was feasible.
Lloyds Action Now is inviting shareholders in the former Lloyds TSB to join the association. A registration fee of £225 + VAT is payable as well as £00.03 p per share held at the time of the merger. No further payment will be demanded of participants to take their case forward.
Full details of funding arrangements are on the website http://www.lloydsactionnow.com.
The website features an instant assessment tool which allows shareholders to see if they have a claim, what category of claim it falls under, how much it will cost them to pursue it and how much compensation they may be due.
Letter to Mary Shapiro (the same letter is being sent to Andrew Cuomo)
July 15th, 2010.
Securities Exchange Commission
100 F Street, NE
Washington, DC 20549
Dear Mrs Shapiro
I am writing to you on behalf of the Lloyds Action Now (LAN) association of shareholders in the former Lloyds TSB (LTSB) which has 1,400 members who are citizens of and resident in the United States.
It is our belief that directors of LTSB deliberately withheld information about the finances of Halifax Bank of Scotland (HBOS), when asking for shareholder approval to take it over in January 2009 to found the Lloyds Banking Group (LBG).
Specifically, the directors did not disclose that HBOS had been supported by the Bank of England with a loan of £25.4 billion in order to keep the company solvent just weeks before a vote on the merger was undertaken by shareholders.
We have been advised by leading counsel in the UK that their failure to do so, as well as that of the UK government who through its Permanent Secretary to HM Treasury assumed responsibility for the accuracy of a circular sent to shareholders making the case for the merger, was contrary to UK Financial Markets legislation.
LAN has written letters of claim to Sir Victor Blank, the former chairman of LTSB, and Mr Eric Daniels, the current CEO of LBG as well as HM Treasury for compensation for the collapse in the value of LBG shares once the market was informed of the true state of HBOS's finances two weeks after the merger took place.
We now ask that you or one of your officers will grant us an appointment in New York/Washington so that we can present you with documentation surrounding this matter so that you may make a judgment whether the withholding of this information is actionable in US law.
You will find extensive background to this case on our website www.lloydsactionnow.com and we are of course at your disposal should you or other members of your team wish to contact for additional information.
Lloyds Action Now Association
For further information, please contact:
Adrian Lithgow, managing director
George Berkeley Public Relations Ltd
Tel: 0844 818 5434 / 0776 419 4719